Enterprise Resource Planning (ERP)

What ERP is NOT

ERP need NOT be a Software

What is ERP: The Meaning

ERP is: An enterprise-wide set of management tools that balances demand and supply, containing the ability to link customers and suppliers into a complete supply chain, employing proven business processes for decision-making, and providing high degrees of cross-functional integration among sales, marketing, manufacturing, operations, logistics, purchasing, finance, new product development, and human resources, thereby enabling people to run their business with high levels of customer service and productivity, and simultaneously lower costs and inventories; and providing the foundation for effective e-commerce.

THE EVOLUTION OF ERP

1960s-Step One-Material Requirements Planning (MRP) What are we going to make?-Master Schedule What does it take to make it?-Bill-Of-Material What do we have?-Inventory Records What do we have to get?-Requirement Planning This is called the universal manufacturing equation

THE EVOLUTION OF ERP..2

Step TwoClosed-Loop MRP Priority vs. Capacity
Priority Which ones? Sequence Scheduling Capacity Enough? Volume Loading

This is Known as is known as priority planning

THE EVOLUTION OF ERP..3

Step TwoClosed-Loop MRPContinued

THE EVOLUTION OF ERP..4

Step ThreeManufacturing Resource Planning (MRP II) A direct Growth of Closed-Loop MRP; involves three additional elements: 1. Sales & Operations Planninga powerful process to balance demand and supply at the volume level, thereby providing top management with far greater control over operational aspects of the business. 2. Financial interfacethe ability to translate the operating plan (in pieces, pounds, gallons, or other units) into financial terms (dollars). 3. Simulationthe ability to ask what-if questions and to obtain actionable answersin both units and dollars.

THE EVOLUTION OF ERP..5

Step FourEnterprise Resource Planning (ERP) The Fundamentals of ERP are same as MRP-II, but more effective in dealing with multiple businesses; predicts and balances demand and supply; It is an enterprise-wide set of forecasting, planning, and scheduling tools.

THE EVOLUTION OF ERP..6

How is ERP more powerful than its predecessor, MRP-II a) applies a single set of resource planning tools across the entire enterprise, b) provides real-time integration of sales, operating, and financial data, and c) connects resource planning approaches to the extended supply chain of customers and suppliers

What an ERP Does

links customers and suppliers into a complete supply chain, employs proven processes for decisionmaking, and coordinates sales, marketing, operations, logistics, purchasing, finance, product development, and human resources.

Goals of an ERP
high levels of customer service, productivity, cost reduction, and inventory turnover, and it provides the foundation for effective supply chain management and e-commerce. It does this by developing plans and schedules so that the right resourcesmanpower, materials, machinery, and moneyare available in the right amount when needed.

THE APPLICABILITY OF ERP

Make-to-stock Make-to-order Design-to-order Complex product Simple product Multiple plants Single plant Contract manufacturers Manufacturers with distribution networks Sell direct to end users Sell through distributors Businesses heavily regulated by the government Conventional manufacturing (fabrication and assembly) Process manufacturing Repetitive manufacturing Job shop Flow shop Fabrication only (no assembly) Assembly only (no fabrication) High-speed manufacturing Low-speed manufacturing

Now the Software Part of ERP

A comprehensive Software Application which covers most of the Features of a typical ERP system with a suitable Front-End for User Interaction, to carry-out most of the day-today business transactions. A Database Back-End integrated with the application, for data storage

Brief History of ERP Application Development

1970s Initial MRP solutions are big, clumsy and expensive. They require a large technical staff to support the mainframe computers on which they run. 1972 Five engineers in Mannheim, Germany begin the company, SAP (Systemanalyse und Programmentwicklung). The purpose in creating SAP is to produce and market standard software for integrated business solutions. 1975 Richard Lawson, Bill Lawson, and business partner, John Cerullo begin Lawson Software. The founders see the need for pre-packaged enterprise technology solutions as an alternative to customized business software applications. 1976 In the manufacturing industry, MRP (Material Requirements Planning) becomes the fundamental concept used in production management and control. 1977 Jack Thompson, Dan Gregory, and Ed McVaney form JD Edwards. Each founder takes part of their name to create the company moniker. Larry Ellison begins Oracle Corporation. 1978 Jan Baan begins The Baan Corporation to provide financial and administrative consulting services. 1979 Oracle offers the first commercial SQL relational database management system. 1980 JD Edwards begins focusing on the IBM System/38 in the early 1980s. MRP (Manufacturing Resources Planning) evolves into MRP-II as a more accessible extension to shop floor and distribution management activities.

Brief History of ERP Application Development..2

1981 Baan begins to use Unix as their main operating system. 1982 Baan delivers its first software product. JD Edwards focuses on the IBM System/38. 1983 Oracle offers both a VAX mode database as well as a database written entirely in C (for portability). 1984 Baan shifts the focus of their development to manufacturing. 1985 JD Edwards is recognized as an industry-leading supplier of applications software for the highly successful IBM AS/400 computer, a direct descendant of the System/38. 1987 PeopleSoft is founded by Dave Duffield and Ken Morris in 1987. 1988 PeopleSofts Human Resource Management System (HRMS) is developed. 1990 Baan software is rolled out to 35 countries through indirect sales channels. The term ERP (Enterprise Resource Planning) is coined in the early 1990s when MRP-II is extended to cover areas like Engineering, Finance, Human Resources, and Project Management.

Brief History of ERP Application Development..3

1991 PeopleSoft sets up offices in Canada. This leads the way to their presence in Europe, Asia, Africa, Central and South America, and the Pacific Rim. 1995 Baan grows to more than 1,800 customers worldwide and over 1,000 employees. 1999 JD Edwards has more than 4,700 customers with sites in over 100 countries. Oracle has 41,000 customers worldwide (16,000 U.S.). PeopleSoft software is used by more than 50 percent of the human resources market. SAP is the worlds largest inter-enterprise software company and the worlds fourth largest independent software supplier overall. SAP employs over 20,500 people in more than 50 countries. To date, more than 2,800 of Baans enterprise systems have been implemented at approximately 4,800 sites around the world.

Brief History of ERP Application Development..4

2001 9/11 occurs creating a drop in demand for new ERP systems 2002 Most ERP systems are enhancing their products to become Internet Enabled so that customers worldwide can have direct access to the suppliers ERP system. 2004 Services Oriented Architecture (SOA) becomes a standard that ERP vendors work towards. This software architecture allows different systems to communicate between one another. 2003-2005 Industry consolidation occurs: Oracle E-Business Suite, JD Edwards, Peoplesoft, and Seibel Microsoft Navision, Axapta, Great Plains, and Solomon Infor Baan, Mapics, and a slew of other products Sage Best Software is aquired

ERP Application Development-The present and Future

The consolidations continue to occur and the key players (SAP, Oracle, Infor and Microsoft) continue to build out their products. The next phase of ERP systems will be the merged products, including Oracles Fusion. Further, a new entry into ERP History will be made as vendors move to cloud computing.

ERP Application-Characteristics
An integrated system that operates in real time (or next to real time), without relying on periodic updates. A common database, which supports all applications. A consistent look and feel throughout each module. Installation of the system without elaborate application/data integration by the Information Technology (IT) department.

ERP Application-Typical Components

Finance/Accounting General ledger, payables, cash management, fixed assets, receivables, budgeting, consolidation Human resources Payroll, training, benefits, recruiting, diversity management Manufacturing Engineering, bill of materials, work orders, scheduling, capacity, workflow management, quality control, cost management, manufacturing process, manufacturing projects, manufacturing flow, activity based costing, product life cycle management Supply chain management

ERP Application-Typical Components..2

Order to cash, inventory, order entry, purchasing, product configurator, supply chain planning, supplier scheduling, inspection of goods, claim processing, commissions Project management Costing, billing, time and expense, performance units, activity management Customer relationship management Sales and marketing, commissions, service, customer contact, call center support Data services Various "selfservice" interfaces for customers, suppliers and/or employees Access control Management of user privileges for various processes

Tangible Benefits of implementing and ERP System

Improves the productivity of process and personnel Lowering the cost of products and services purchased Paper and postage cost reductions Inventory reduction Lead time reduction Reduced stock obsolescence Faster product / service look-up and ordering saving time and money Automated ordering and payment, lowering payment processing and paper costs

Intangible Benefits of implementing and ERP System

Increases organizational transparency and responsibility Accurate and faster access to data for timely decisions Can reach more vendors, producing more competitive bids ; Improved customer response Saves enormous time and effort in data entry ; More controls thereby lowering the risk of misutilization of resources Facilitates strategic planning Uniform reporting according to global standards

ERP-Top 5 Vendors with their Market Share

Vendor
SAP Oracle Applications The Sage Group Microsoft Dynamics SSA Global Technologies

Revenue (million $) 1949 1374 1121 916 464

Market share (%) 30.33 21.38 17.44 14.25 7.22

ERP-Some Major ERP Vendors around Globe

SAP Oracle Applications Infor Global Solutions The Sage Group Microsoft Unit 4 Agresso CDC Software Epicor Visma Industrial and Financial Systems (IFS) Comarch QAD Cincom Systems abas Business Software COA Solutions Ltd NetSuite Jeeves SIV.AG Technology One Pronto Software

ERP Applications-Categorization
Based on the Nature of Market: ERP for SMB (Small and Medium Industries)
Eg: Navision from Microsoft, Business-One form SAP.

ERP for Large Enterprises

Eg: mySAP from SAP, JD Edwards from Oracle

Based on the Vendor Business Model: Free and Open Source ERP software(around 25)
Eg.: ERP5, FreedomERP, OpenPro, OpenERP, GNU Enterpirse

Proprietary ERP software(around 90+)

Eg.: mySAP form SAP, Ramco OnDemand ERP from Ramco Systems, Tally ERP9 from Tally Solutions etc.

Implementing and ERP System-Typical Steps

Process preparation Configuration Customization Extensions Data migration Final Testing and Preparation Going Live Continued Support and Maintenance

ERP In India
Few early adopters of ERP Systems in India are: HLL, ONGC, ESSAR, Godrej Soaps, Cadburys, BASF, Telco, Maruti Udyog Ltd., Century Rayon, Citibank, ACC, ANZ Grindlays, German Remedies, Blue Star, Mahindra & Mahindra, Rallis India, Sony India Pvt. Ltd., Ceat Ltd., Indal, Ford Motors, Kirloskar, Knoll Pharmaceuticals, Glaxo etc.